What Is the Drawback of Using a Letter of Credit

question 79

Multiple Choice

What is the drawback of using a letter of credit system?

• A)The exporter is no longer entitled to preexport financing
• B)The importer no longer trusts the exporter
• C)The exporter is not guaranteed any payment
• D)The importer must pay the bank a fee for the letter of credit

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Definitions:

Direct Materials Cost Variance

The difference between the actual cost of direct materials used in production and the standard cost expected to be used.

Direct Labor Cost Variance

The difference between the budgeted cost of direct labor and the actual cost incurred.

Cost Variance

The difference between the expected (budgeted) cost and the actual cost incurred.

Actual Costs

The real, observed expenditures incurred as opposed to estimated or standard costs.